Michigan

U.S. News & World Report, the global authority in rankings and consumer advice, today unveiled the 2017 Best Places to Live in the United States. The new list ranks the country’s 100 largest metropolitan areas based on affordability, job prospects and quality of life…

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Predictably, the Chicago metro area made the list.

Somewhat surprising is how far down it was:

Chicago, IL#83 in Best Places to Live
6.1 Overall Score
5.9 Quality of Life
6.1 Value

The 2017 Best Places to Live were determined in part by a public survey of thousands of individuals across the U.S. to find out what qualities they consider important in a home town. The methodology also factors in data from the United States Census Bureau, the Federal Bureau of Investigation and the Bureau of Labor Statistics, as well as U.S. News rankings of the Best High Schools and Best Hospitals…

Friday night, Chuck Goudie of Chicago’s ABC7 News reported the following concerning an I-Team investigation into home-grown jihadists. From the TV station’s website:

Two new investigations of American terrorists portray a chilling image of terrorists living in our midst, and concentrated in the Midwest.

Targeting the jihadist next door in the Midwest would have to become a priority according to new data compiled by House Homeland Security investigators. They lay out an “unprecedented spike in the homegrown terror threat, primarily driven by the rise of ISIS.” That, along with a new University of Chicago report on the American face of ISIS, paint a frightening picture of the threat growing among us.

First for Al Qaeda and now for ISIS, Chicago is a crossroads of home-grown terrorists.

According to new findings by the House Homeland Security Committee, the tentacles of terror cases in Michigan, Indiana and Wisconsin since early 2016 touch Chicago…

Besides home-grown jihadists, in May 2015 a threat attributed to the Islamic State posted on anonymous message board JustPasteIt claimed the following:

We have 71 trained soldiers in 15 different states ready at our word to attack any target we desire. Out of the 71 trained soldiers 23 have signed up for missions like Sunday. We are increasing in number bithnillah. Of the 15 states, 5 we will name… Virginia, Maryland, Illinois, California, and Michigan…

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“Bithnillah” (“bi’ithnillah”) can be translated as meaning “with the permission of Allah.” The post was signed “Abu Ibrahim Al Ameriki,” a U.S.-born terrorist with the group.

With no easy way to financially engineer or negotiate its way out of a budget and pensions crisis, Illinois is likely to dish out some unpleasant medicine to its residents in the next few years. And investors say that is most likely to come in the form of higher taxes.

Given the Democrats’ control of the state legislature and their opposition to many proposals for spending cuts, municipal bond fund managers see little alternative for Republican Governor Bruce Rauner other than eventually agreeing to hike taxes, such as raising the state’s income tax or broadening its sales tax base…

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Regular readers of Survival And Prosperity shouldn’t be surprised when the hikes (fees, fines, and taxes) arrive, as they’ve been discussed on this blog for quite some time now. The tragedy is that Springfield continues to waste time and resources on trivial matters while neglecting to tackle crucial issues like the well-publicized debt crisis. Monique Garcia and Kim Geiger reported on the latest nonsense preoccupying the politicians. From the Chicago Tribune website this afternoon:

Democratic Speaker Michael Madigan’s effort to ask voters to approve a measure to impose higher income taxes on millionaires failed in the House on Thursday, but provides the powerful Southwest Side politician ammunition to attack Republicans in next year’s legislative campaigns.

The proposal needed 71 “yes” votes to pass, but received just 68. But now there’s a roll call, and Madigan’s Illinois Democratic Party could send out mailers criticizing Republicans who voted against the idea. Democrats already have sent out attack ads against Republicans who did not vote in favor of a property tax freeze last week…

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Games. Stupid political games as the state’s “financial reckoning day” fast approaches.

By the way, back on March 24 of last year I blogged about that push for a “millionaire’s tax” in Illinois. My prediction now is pretty much the same as it was a year ago:

Should Illinois Democrats jack up their income taxes, I suspect the number of Illinois millionaires right before the tax hike is implemented will plummet. Revenue will follow. Out-of-state vacation homes in Indiana and Wisconsin will be declared as primary residences.

The only difference being, I forgot to mention Michigan vacation homes.

So claims a threat attributed to the Islamic State posted on anonymous message board JustPasteIt, per Sasha Goldstein and Jason Silverstein over on the Daily News (New York City) website late last night. From the message entitled “The New Era”:

The attack by the Islamic State in America is only the beginning of our efforts to establish a wiliya in the heart of our enemy…

We have 71 trained soldiers in 15 different states ready at our word to attack any target we desire. Out of the 71 trained soldiers 23 have signed up for missions like Sunday. We are increasing in number bithnillah. Of the 15 states, 5 we will name… Virginia, Maryland, Illinois, California, and Michigan…

“Illinois.” Yet another list we’d really prefer not to be on.

According to various sources on the Internet, “wiliya” (“wilayah”) means “province,” and “bithnillah” (“bi’ithnillah”) can be translated as meaning “with the permission of Allah.” The post was signed “Abu Ibrahim Al Ameriki,” a U.S.-born terrorist with the group.

Last August, I blogged about a Twitter post supposedly connected with the Islamic State which contained a photo of the Old Republic Building, 307 North Michigan Avenue, Chicago, along with the following:

#AmessagefromISIStoUS

We are in your state
We are in your cities
We are in your streets
You are our goals anywhere.

In that same August 27, 2014, post, I noted retired General Michael Hayden, the former Director of the Central Intelligence Agency and National Security Agency, had just told CNN’s Jim Sciutto in an interview:

HAYDEN: Well, Jim, you’ve outlined it perfectly. This is a question of timing. Not of inevitability. Not of intent. And right now, I think it’s fair to say, that ISIS is very powerful local terrorist organization, and probably a reasonably powerful regional terrorist organization. But it’s one that has global ambitions. And it has the tools, as you suggested. American passport holders, European passport holders. It’s expressed the intent. And so, if it’s not Tuesday, it’s at a time and place of their choosing. And will come probably sooner rather than later. Look, they’re in a competition now with Al-Qaeda Prime, folks along the Afghan-Pakistani border, and there’s no way more powerful to express their street credentials among the jihadist community than a successful attack against the West.
SCIUTTO: So, to be clear, you’re saying it’s just a matter of time before ISIS attempts to attack or attacks the U.S. homeland?
HAYDEN: I think so…

Last Wednesday, I remindedSurvival And Prosperity readers (local ones in particular) that Chicago- upon reelecting Rahm Emanuel as Mayor- remains in serious financial trouble. From that post:

As Rahm Emanuel enters his second term as Mayor of Chicago, I feel that proverbial brick wall is still fast-approaching.

Perhaps the best Chicagoans can hope for at this point is a controlled crash landing.

I know one thing. If I were still living in the city, I’d be preparing for the coming carnage…

Some readers might feel I was being a little too “sensational” with that statement. Therefore, I’d like to offer up the following for your consideration. Reuters’ Megan Davies and Karen Pierog reported on April 8:

Chicago has not seen the population losses Detroit did and its business and commercial real estate markets remain healthy, but its current circumstances are more dire than any other major American city today, with aggregate debt of $21.4 billion, up 60 percent since 2004.

Although Chicago’s situation isn’t bad enough yet to warrant a bankruptcy filing, that threat is out there if it fails to tackle its problems.

“People say Chicago’s not Detroit,” said Tom Metzold, a senior portfolio advisor at investment manager Eaton Vance. “Not right now. Chicago is Detroit ten years from now. I don’t care how economically strong your economy is. They don’t have a printing press. You can only tax so much.”

Metzold estimated the odds of a Chapter 9 bankruptcy in the next five years are “virtually zero” but said in the next 10 years that could rise to 25 percent if it fails to act…

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In case readers are wondering, Metzold’s s “Street cred” includes serving as VP and Co-Director of Municipal Investments at Eaton Vance (one of the oldest investment management firms in the U.S.- established 1924), and as its Portfolio Manager since 1991.

Not as “optimistic” about Chicago’s financial future is Joe Mysak, Editor of Bloomberg Brief. He warned in an April 8 commentary:

I’m not a betting man. If I were, I’d bet that Chicago is going to be run by an Emergency Financial Control Board, or something like it, within two years, the same as New York City back in 1975 (and until 1986)…

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Mysak, who’s been covering the municipal bond market since 1981, pointed out the city’s abysmal Moody’s credit rating (“one step from the basement of investment grade”) and wrote:

So a cut to junk may well be in the cards, and with it diminished and eventually lack of access to capital. Chicago has already creatively used, and some would say abused, the municipal market to subsidize city operations…

When the banks no longer want to lend to Chicago is presumably when the state of Illinois would come in, offering cash, loan guarantees, intercession with the federal government and whatever else the city needs in exchange for external management via an Emergency Financial Control Board…

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The author of the Encyclopedia of Municipal Bonds signed-off with:

Two years. That’s how long I give the city of Chicago. Good luck, Rahm.

Since I started blogging about a U.S. financial crash back on Memorial Day Weekend 2007, I’ve believed one casualty will be municipal government. Particularly in Illinois. So imagine my non-surprise when I spotted an article on the Chicago Tribune website a couple of days ago about proposed legislation at the state level granting Illinois towns the authority to file for bankruptcy. Nick Swedberg of the Associated Press wrote on March 26:

Stressed by pension debt, other financial issues and the possibility losing a chunk of their state aid, some Illinois cities want the option to file for bankruptcy. They’ve found an ally in a Republican lawmaker, who’s proposed legislation to allow municipalities to follow in the footsteps of Detroit and other cities in restructuring debt and paying back creditors…

Rep. Ron Sandack is sponsoring legislation that would grant authority for communities to file for bankruptcy under Chapter 9 of the federal code. The Downers Grove Republican says it’s a “measure of last resort,” especially with Gov. Bruce Rauner’s proposal in next year’s budget to cut in half the local governments’ share of state income taxes by 50 percent.

“It’s just giving time and space to do things right,” he said…

Swedberg added later in the piece:

Municipal bankruptcies are rare, NCSL data shows. Of 37 local government filings since 2010, only 8 were cities, with the majority filed by utilities and special districts.

Detroit filed for the nation’s largest municipal bankruptcy in July 2013, looking to restructure $12 billion of debt…

It’s true. Municipal bankruptcies haven’t happened too often. But keep in mind what Eric Weiner wrote on the NPR website back on February 28, 2008:

For most of U.S. history, cities and towns were not eligible for bankruptcy protection. But during the Great Depression, more than 2,000 municipalities defaulted on their debt, and they pleaded with President Roosevelt for a federal bailout. “All they got was sympathy,” reported Time magazine in 1933. Instead, Roosevelt pushed through changes to the bankruptcy laws that allows towns and cities to file for bankruptcy. They even got their own section of the bankruptcy code: Chapter Nine…

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There’s also this from Robert Slavin on The Bond Buyer website back on January 14:

For the municipal bond industry, 2015 marks the midpoint in what may turn out to be the decade of the bankruptcy.

Four of the five largest municipal bankruptcy filings in United States history have been made in roughly the last three years, a trend analysts attribute to the aftereffects of the 2008 credit crisis and Great Recession, as well as changing attitudes about debt.

“The crash of 2008 and five years of stagnation preceded by years of escalating wages, pensions and Other Post-Employment Benefits set the stage for our recent Chapter 9 filings,” said Arent Fox partner David Dubrow.

Chapter 9 municipal bankruptcy was adopted in 1937 but had been rarely used, particularly by large governments. However, since November 2011 San Bernardino, Calif., Stockton, Calif., Jefferson County, Ala., and Detroit have filed four of the five largest bankruptcies as measured by total obligations.

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Could the specter of Meredith Whitney, the “Diva Of Doom,” be returning to take revenge on the municipal bond industry?

I’m not surprised Illinois municipalities would be interested in House Bill 298. From Patrick Rehkamp and Andrew Schroedter on the website of the Chicago-based Better Government Association back on December 6, 2014:

Reasons for filing vary but often include troubled public development projects, unanticipated hefty legal judgments against a taxpayer-backed entity, or massive pension and bond debt payments that leave a municipality cash-strapped and unable to cover operating costs of employee salaries, vendor payments and other expenses.

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The public pension crisis in Chicago and Illinois has been well-publicized for some time now. And while such entitlements are supposedly protected by a provision in the 1970 Illinois Constitution, the BGA noted in their piece:

In Illinois, public employee pensions are guaranteed by the state constitution. But in the Detroit and Stockton, California bankruptcy cases, federal judges have ruled that pension benefits can be adjusted, the same as other debts, despite a constitutional guarantee.

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You can track the progress of HB 298 on the Illinois General Assembly website here.

“Detroit’s police chief has a solution to help drive down crime in one of the nation’s most dangerous cities: arm more citizens.

James Craig made the comments at a police press conference Thursday, when he announced a 7 percent drop in violent crime in 2013, The Detroit News reported. Although urban police typically favor gun control, Craig said his views evolved after working in Los Angeles and Maine, where concealed weapons permits are more easily obtained.

‘I changed my orientation real quick,’ Craig said. ‘Maine is one of the safest places in America. Clearly, suspects knew that good Americans were armed.’

-FOX News website, January 3, 2014

Detroit Police Chief James Craig grabbed national headlines back in July with that comment in support of armed city residents to fight crime. And he’s in the news again today regarding that same topic. George Hunter reported on The Detroit News website:

Detroit has experienced 37 percent fewer robberies in 2014 than during the same period last year, 22 percent fewer break-ins of businesses and homes, and 30 percent fewer carjackings. Craig attributed the drop to better police work and criminals being reluctant to prey on citizens who may be carrying guns.

“Criminals are getting the message that good Detroiters are armed and will use that weapon,” said Craig, who has repeatedly said he believes armed citizens deter crime. “I don’t want to take away from the good work our investigators are doing, but I think part of the drop in crime, and robberies in particular, is because criminals are thinking twice that citizens could be armed.

“I can’t say what specific percentage is caused by this, but there’s no question in my mind it has had an effect,” Craig said.

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Too bad the merits of an armed citizenry in the face of significant criminal activity are being recognized after Detroit had already imploded.

Seeing that there’s no shortage of talk about Chicago becoming the next Detroit, perhaps Mayor Emanuel and his City Council are taking note of the “Motor City’s” experiences?